A Manufacturing Contract is a legal contract that is created between two organizations when they have mutually discussed and decided to enter into an agreement to manufacture and create a new product. In this type of legal documents, the first party is usually the company or organization who has the idea of manufacturing a new product, and the second party is the organization or agency who has been chosen as the manufacturing partner for the said organization. This contract outlines the exact specifications and dynamics of the product that needs to be manufactured, along with other finer details of the agreement.
When Do You Need a Manufacturing Contract?
The most common use of a Manufacturing Contract can be found when an organization has come to the decision of creating a new product for the market and has thus partnered up with another organization or manufacturer in order to manufacture the said product. This legal document acts a bond of trust between both the organizations and outlines the exact specifications of the product to be manufactured.
One of the most important things to note about this contract is the fact that it clearly states that the product which will be manufactured will have the brand of the parent organization and not the manufacturing partner.
Inclusions in Manufacturing Contract
- Parties Involved: In a Manufacturing Contract, there are usually two parties involved; the first being the company or organization who needs the product to be manufactured, also known as the Company and the second being the chosen manufacturing partner, also known as The Manufacturer in legal terminologies.
- Effective Dates: This section of the contract outlines the dates of significance of the agreement, for example when the manufacturing process should start, by when the manufacturing needs to be completed and also the total duration of contract’s tenure.
- Where does it Apply: This contract is legally binding within the boundaries of the state, city or county it was originally drawn at.
How to Draft a Manufacturing Contract?
Follow the mentioned below steps in order to draw Manufacturing Contract.
- Organize a meeting between both the parties involved and discuss upon the terms and conditions of the manufacturing agreement. Discuss upon the dates from when the contract will come into effect as well as details about the amount of funds that will be disbursed for the manufacturing process to take place.
- Once both the parties have agreed to the terms and conditions, reach out to a legal team and ask them to draft a Manufacturing Contract on your organization’s behalf.
- Cross verify and check the details with both the parties and file the contract in the local court of law as advised by your legal team.
Benefits of a Manufacturing Contract
The benefits of having a Manufacturing Contract are outlined as below.
Pros of Manufacturing Contract
- This legal document clearly outlines the individual responsibilities of both the parties before and after the contract has come into effect and thus makes sure that both parties are well aware of their duties and responsibilities at all points in time.
- This contract is a legal document and thus can be presented in court if there ever a need in the future for the same.
Cons of Not Having a Manufacturing Contract
- In the absence of a Manufacturing Contract, both parties don’t have a legal proof of a transaction ever taking place between both the entities and therefore stand to lose if the matter is ever taken to court.
[Also Read: Exclusive Manufacturing and Supply Agreement]
Key Terms & Clauses in Manufacturing Contract
- Notices: Both the stakeholders in the contract need to issue certain notices to each other and this section of the contract, outlines the details of the same.
- Disclaimers: The parties involved in the creation of the contract need to provide certain disclaimers to each other and this section contains details of the same.
- Remedies: In the case of a lapse in agreed terms and conditions or a default in payment, certain remedies immediately come into effect, the details of which are enclosed in this section of the contract.
- Obligations: Both the parties have certain obligations to each other, during, and after the creation of the contract, the details of which are mentioned here.
Sample Manufacturing Contract Agreement
A sample of the agreement can be downloaded from below.